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Title:	Influence of lock-up provision on flipping activity of Malaysian IPO
Authors:	Norliza Che Yahya (UKM Bangi) (ZP00777)
Supervisor:	Ruzita Abdul Rahim, Professor Dr.
Keywords:	Going public (Securities)-Malaysia
Issue Date:	6-Aug-2014
Description:	This study examines the influence of lock-up provision and institutional investors’ participation on flipping activity and investigates the moderating effect of information asymmetry and investor demand on the relationships between these main variables and flipping activity. Studies on flipping activity are crucial as extant literature posits that excessive flipping activity can be harmful for firms’ value and shareholders’ wealth. Despite the adverse effects, empirical works that examine determinants of flipping activity are scant, signifying the importance of this study. Malaysian initial public offering (IPO) market offers a suitable setting for such a study because trading volume of IPOs on the first trading day exhibits a ‘tsunami-like’ pattern, indicating possibility of excessive flipping activity. This study proposes that lock-up provision parameters (ratio and period) and institutional investors’ participation could be effective mechanisms to restrict flipping activity. Lock-up provision, which is imposed on IPO issuers, may work directly in controlling flipping activity that could cause an overflow of the new shares in the immediate aftermarket. Posited as long-term investors, institutional investors are also less likely to flip their shares in the immediate aftermarket. According to the demand-supply theory, both factors are expected to reduce flipping activity. The effect of lock-up provision and institutional investors’ participation on flipping activity could also be associated with signaling hypothesis. Therefore, this study seeks to achieve the following objectives: 1) to investigate the influence of lock-up provision on flipping activity in Malaysian IPO market; 2) to examine the influence of participation of institutional investors on flipping activity in Malaysian IPO market and; 3) to examine the moderating effect of asymmetry information and investor demand, separately on these main relationships. This study employs cross-sectional multiple regression analyses to test its hypotheses, while hierarchical multiple regression analyses are employed to examine the moderating effect of information asymmetry and investor demand. Using data set from 370 IPOs listed on Bursa Malaysia over the period from January 2000 to December 2012, this study finds evidence that lock-up provision works as a regulatory mechanism to reduce flipping activity, credible signal of quality for the issuing company and commitment of the promoters for the well-being of the companies. Specifically, lock-up period and lock-up ratio reveal significant negative relationships with flipping activity. This study also finds a negative relationship between institutional investors’ participation and flipping activity, albeit insignificant. Moreover, as theoretically predicted, information asymmetry does moderate the influence of lock-up period and institutional investors’ participation on flipping activity. Intuitively, the finding indicates that the severity of information asymmetry increases the signaling content of lock-up period and institutional investors’ participation as high information asymmetry increases the tendency of the investors to flip their shares. Meanwhile, investor demand is found to increase the effectiveness of lock-up period and institutional investor in reducing flipping activity. Intuitively, this finding suggests that investor demand reflects future prospects of the IPOs. Investors seem to see greater incentives for holding on to their new quality shares because highly demanded IPOs are usually offering higher initial returns or indicating good quality of the issuing companies.,Ph.D
Pages:	255
Call Number:	HG4028.S7N675 2014 tesis
Publisher:	UKM, Bangi
Appears in Collections:	Graduate School of Business / Pusat Pengajian Siswazah Perniagaan

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